‘Draconian’ sanctions based on Mitchell are overturned

The Court of Appeal has overturned a judgment that imposed ‘draconian’ sanctions on a law firm for missing four cost deadlines, ruling that the previous judge was ‘mistaken’ in his approach.

In a previous case, Lord Justice Lewison struck out an appeal made by Kazakhstan-based firm Michael Wilson & Partners (MWP), after it missed costs deadlines ‘by a very large margin’ without providing any good reason for the breach.

Lewison based his decision on the Mitchellruling from November 2013, which he described as a ‘game-changer’. But MWP appealed the judgment after Lord Dyson in the Denton case in July last year ruled that the Mitchell guidance had been ‘misunderstood and misapplied’.

In Michael Wilson & Partners Ltd v Sinclair & Ors, Lord Justice Richards ruled that Lewison’s judgment to strike out MWP’s appeal, given the firm by that time had already paid the cost orders, was a ‘very strong step indeed’.

He said although he saw why Lewison took the ‘draconian’ approach he did based on his understanding of the principles laid down in Mitchell, viewing the case through the lens of Denton, Lewison had approached the matter ‘too narrowly’ and reached a decision that was ‘plainly wrong’.

Richards said he was satisfied that there was no good reason for MWP to miss the deadlines, as previously the firm had given the impression it was ‘full of money’, and he agreed that the subsequent excuses for the delay ‘ring hollow’.

But he said that Lewison did not ‘have regard to all the circumstances of the case’, which the Denton ruling stressed must be done.

Richards said: ‘This is a key point, since consideration of all the circumstances of the case casts a very different light on the matter.’

These considerations included the fact that a previous judge had ruled that in the event of MWP failing to pay the costs within the deadline the appeal would be stayed rather than struck out, with the intention that this stay would be lifted once a payment was made.

Richards also pointed that a strike-out is a ‘sanction of last resort’, which he concluded meant that a move straight from a stay to a strike-out would be unexpected unless MWP continued to default on its payments.

He said in this light he would revoke Lewison’s decision, and also lift the stay on the appeal, allowing it to proceed. Lord Justice Christopher Clarke agreed with the judgment.

The judgment will allow MWP to appeal a previous decision to strike out a claim the firm had made against its former director John Emmott.